Rectification for mistaken capital base computation allowed where excluded expenses were wrongly included in section 80J relief

In computing section 80J relief, preliminary expenses and share issue expenses were treated as not includible in the capital base under rule 19A(3). Their erroneous inclusion was held to be a mistake apparent from the record because exclusion followed from the governing rule and did not require elaborate reasoning. Rectification under section 154 was therefore valid, and the Tribunal was wrong to hold that no apparent mistake existed. The assessment could be corrected by removing the disputed expenses from the capital base for the relief computation.

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Issues: Whether the inclusion of preliminary expenses and share issue expenses in the capital base for relief under section 80J could be corrected under section 154 as a mistake apparent from the record.

Analysis: The relief under section 80J was being computed for the third year, and the same expenses had not been included in the earlier years. The question whether such expenses formed part of the capital base depended on the proper construction of rule 19A(3) and did not require a long drawn process of reasoning for exclusion. An error that is obvious on the record may be rectified under section 154, and the inclusion of amounts not legally includible in the capital base amounted to such an error.

Conclusion: The rectification under section 154 was valid, and the Tribunal was in holding that no mistake apparent from the record existed; the answer was in favour of the Revenue.

Final Conclusion: The reference was answered against the assessee, upholding the power to rectify the assessment by excluding the disputed expenses from the capital base for section 80J relief.

Ratio Decidendi: An inclusion in the computation of relief that is contrary to the governing rule and does not require a debatable or elaborate reasoning process constitutes a mistake apparent from the record and can be rectified under section 154.

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